Government aid bonds
This project uses the term "Aid bonds" to describe a class of securities issued by practically every level of public entity in the U.S., Canada, and Mexico. The idea was to use their bonding authorities to raise money in order to entice railroads to build into their area of influence. Generally, aid was earmarked specifically for construction, but it is hard to imagine it was easy to keep public money separate from private funds.
Over 325 different varieties of bonds in this project are considered aid bonds. Practically every level of public entity is represented:
Most bonds were issued in the U.S. and mostly east of the Mississippi. A few aid bonds are known from Canada, Mexico and Haiti. Counties are the most heavily represented type of borrower, followed by towns, cities and townships. Together, these four groups account for 75% of aid bonds identified so far.
The clipping at right came from the January 13, 1844 edition of the New York Weekly Tribune. It tells how the city of Cincinnati was considering lending $100,000 in city bonds to help fund the completion of the Little Miami Railroad to Xenia, Ohio. We don't know whether the city ever received authorization for the loan of its bonds.
Rates and terms
The basic ideas were that public entities would borrow money from investors by issuing bonds with appealing interest rates of 6% to 8% and terms commonly ranging from 15 to 30 years.
Money raised from bond sales would then be spent to purchase stock of railroad companies that had announced plans to build into their counties and towns. Documentary evidence of paired transactions is very difficult to find, but we have one such example in Colorado.
After a couple of name changes, the Colorado Central Rail Road Company began building west from Denver fifteen track miles to the Territorial Colorado capital of Golden at the foot of the Front Range Mountains. Its intent was to build through Jefferson County to Golden and then up Clear Creek toward the now-famous Central City Mining District in Gilpin County. Additional plans were on the books to reach into Boulder County and its gold districts. As with most frontier rail building operations, plans were greatly more grandiose than investments.
Based on a collection of county aid bonds discovered by a railroad researcher, we see can that negotiations were in the works months before tracks reached the mountain front. Jefferson County authorized a bond issuance to benefit the Colorado Central in June, 1868. A month later, the county purchased Colorado Central stock which is represented by two surviving certificates (#3 and #4).
Central City had been founded in 1859 near the site of the first gold discoveries in the mountains. Mining had been going gangbusters through about 1865, but had slowed once mines began hitting sulfide-rich rock. Although the rock was still rich in gold, the districts' previous milling methods were nearly worthless. Money became tight as the district sank into a depression that lasted until a smelter was built in 1868 using Cornish methods. As mines reopened and gold bars began emerging from the smelter, money began flowing again.
Once it became apparent that the railroad was actually going to reach the smelter at Black Hawk (adjacent to Central City on the west), Gilpin County followed Jefferson County's lead and authorized a $250,000 aid bond issue in January, 1873. Gilpin must have sold a substantial number of bonds because it soon purchased many stock certificates from the railroad. Fourteen certificates (as of late 2023) are currently known that had been issued to Gilpin County starting in April of that year. Certificate numbering suggests substantially more similar certificates were issued and might still exist. Below are examples of one of the Gilpin County aid bonds and a Colorado Central Rail Road stock certificate purchased with the proceeds. To show you how closely Gilpin County was tied to the Colorado Central, note that the aid bonds used the same vignette as the railroad's stock certificates.
We have no information about Boulder County aid bonds, but their earlier existence is a foregone conclusion based upon the recorded existence of twenty Colorado Central stock certificates issued to that county.
Printing quality and denominations
Perhaps the most numerous aid bonds in the U.S. are those issued by counties and towns located between New York City, Syracuse, and Lake Ontario. Aid bonds from the State of North Carolina are also numerous. With the possible exception of the North Carolina bonds engraved and printed by Danforth, Wright & Co., most aid bonds are unimpressive. Most aid bonds issued outside of North Carolina were lithographed. Printers tended to be located in the largest towns in the various states. Most aid bonds were printed in horizontal formats. Like many municipal bonds of the era, aid bonds were commonly issued in several denominations, usually $100, $500, and $1,000. Cancelled aid bonds indicate that the issuing entities were successful in paying off their debts.
Aid bonds correspond to population and rail growth. Only one variety has been recorded with a date before 1850 and only seven recorded with dates after 1910. Most fall into the range of 1850 through the 1880s, the period of greatest rail development in the United States. All aid bonds recorded to date were denominated in lawful money; none were denominated in gold.